Another Widening Gap: The Haves vs. the Have-Mores

A selection of yachts at the recent Fort Lauderdale International Boat Show, held at various sites in the Florida city.CreditCreditAndrew Innerarity for The New York Times

By Robert Frank

Nov. 15, 2014

Philip Rushton has been selling private jets to the global rich for more than three decades. In just about every economic cycle, sales of small jets and big jets tended to move together — rising and falling with financial markets and fortunes of the wealthy.

Now, however, the jet market is splitting in two. Sales of the largest, most expensive private jets — including private jumbo jets — are soaring, with higher prices and long waiting lists. Smaller, cheaper jets, however, are piling up on the nation’s private-jet tarmacs with big discounts and few buyers.

“The real demand is at the very top,” said Mr. Rushton, the president of Aviatrade, a private-jet brokerage and advisory company. “The big guys, the billionaires, have plenty of money, and they’re buying. But the middle and lower end has been much slower to recover from the crisis.”

The wealthy now have a wealth gap of their own, as economic gains become more highly concentrated at the very top. As the top one-hundredth of the 1 percent pulls away from the rest of that group, the superrich are leaving the merely very rich behind. That has created two markets in the upper reaches of the economy: one for the haves and one for the have-mores.

Whether the product is yachts, diamonds, art, wine or even handbags, the strongest growth and biggest profits are now coming from billionaires and nine-figure millionaires, rather than mere millionaires.

“The very wealthy are often the ones pulling the trigger right now, and they have a very big trigger,” said Jim Taylor, a wealth specialist and managing partner of YouGov, the marketing research and survey firm.

Of course, the lesser 1 percenters are still doing just fine. But a closer look at the divergence at the very top rungs of the ladder offers a more detailed view of the drivers of inequality today. And the divide is reshaping the luxury end of the consumer economy.

According to a recent paper by the economists Emmanuel Saez of the University of California, Berkeley, and Gabriel Zucman of the London School of Economics, almost all of the increase in American inequality over the last 30 years is attributable to the “rise of the share of wealth owned by the 0.1 percent richest families.” And much of that rise is driven by the top 0.01 percent.

The wealth of the top 1 percent grew an average of 3.9 percent a year from 1986 to 2012, though the top one-hundredth of that 1 percent saw its wealth grow about twice as fast. The 16,000 families in that tiptop category — those with fortunes of at least $111 million — have seen their share of national wealth nearly double since 2002, to 11.2 percent.

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Other forms of luxury transportation also abounded at the annual event — whether a Bentley or a helicopter perched atop one boat.CreditAndrew Innerarity for The New York Times

“Wealth is getting more concentrated in the United States,” the authors wrote. “But this phenomenon largely owes to the spectacular dynamics of fortunes of dozens and hundreds of million dollars, and much less to the growth in fortunes of a few million dollars.”

Dr. Saez and Dr. Zucman wrote that a “snowballing effect” was creating extravagant wealth at the very top. Outsize incomes — fueled in part by stock — are put into savings and investments, which generate more income, which creates even more wealth.

Mr. Rushton, the jet broker, has seen that snowball up close. During the financial crisis in 2009, the market for virtually all private jets collapsed. Yet, in a contrast to earlier recoveries, the demand for new, large-cabin jets has staged a much stronger comeback while the supply of new and used smaller and midsize jets is piling up.

According a jet market report from Citi Private Bank, deliveries of new so-called light jets — the smaller, cheaper models — were down 17 percent last year from 2012 and 67 percent from their 2008 peak. But deliveries of the biggest new private jets jumped 18 percent last year.

Demand for billionaires’ most coveted jet, the $65 million G650 from Gulfstream, is so strong that some G650 owners are now flipping their planes for millions of dollars in profit just months after buying them. Bernie Ecclestone, the Formula One auto-racing promoter and billionaire, flipped his for about $72 million last fall — just weeks after he received it.

Sales of personal, V.I.P. jetliners are also strong. Boeing has received several orders from individuals for its 777-300ER (which normally carries 400 passengers) and its even bigger 747-800.

“The really top guys are insulated from fluctuations in the economy,” Mr. Rushton said. “They’ve always got money, and they have even more today.”

For decades, a rising tide lifted all yachts. Now, it is mainly lifting megayachts. Sales and orders of boats longer than 300 feet are at or near a record high, according to brokers and yacht builders. But prices for boats 100 to 150 feet long are down 30 to 50 percent from their peak.

Henk de Vries, chief executive of Feadship, the yacht builder, says the strongest market in yachting today is for boats more than 250 feet long. The company is about to deliver its largest boat — a 330-footer that sells for more than $250 million — and it recently expanded its shipyard to make ever-bigger hulls. (The largest yacht is now the 590-foot Azzam, owned by the president of the United Arab Emirates.)

Jonathan Beckett, the chief executive of Burgess, the yacht broker and advisory company, put it this way: “The folks at the top feel like they’ve come through the crisis intact.” He added, “They’re a fairly confident group, and they’re saying, ‘If I’m going to build a boat, I want to do it right.’ ”

ROBERT FRANK is CNBC wealth editor and the author of “Richistan.”

A version of this article appears in print on , on Page BU4 of the New York edition with the headline: Another Widening Gap: The Haves vs. the Have-Mores. Order Reprints | Today’s Paper | Subscribe